Gold-Backed Digital Currency Is Zimbabwe’s Way to Sway Love for Dollars

Ray Ndlovu, Bloomberg News

A street vendor exchanges Zimbabwean dollar banknotes with a customer at the bus terminus in the central business district of Harare, Zimbabwe, on Wednesday, July 5, 2023. Consumer prices are climbing at an annual pace of over 100%, sparking jitters in a nation where the scars of hyperinflation run deep. , Bloomberg

(Bloomberg) -- Zimbabweans are still not yet sold on the government’s latest attempts to get them to ditch their favorite currency: the US dollar.

Banks are seeing a slow uptake of gold-backed digital money almost a week after the central bank issued the so-called “ZiG” for use in domestic transactions and as an alternative store of value.

The greenback this year replaced the Zimbabwean dollar as the most-used currency in the southern African nation for a second time, after the local unit was re-introduced in 2019. The US dollar now accounts for 80% of transactions despite the government’s best efforts to get the population to use less greenbacks and reduce the volatility in the domestic currency.

Although lenders can now open accounts, facilitate interbank transfers and offer card transactions in the new digital money, the demand from ordinary citizens is low, according to Lawrence Nyazema, president of the Bankers Association of Zimbabwe.

“I see more uptake by pension funds and high-net worth individuals with excess Zimbabwe dollars than the average person who is struggling to make ends meet,” he said in an interview on Tuesday. This was the same trend with the introduction of physical gold coins, Nyazema said.

The central bank started selling the gold coins in July 2022, a strategy also aimed at reducing reliance on the US dollar.

The International Monetary Fund has previously cautioned against the introduction of the gold coins and digital money, instead urging the central bank to focus on liberalizing its exchange rate.

At least 12 out of the country’s 19 lenders are so far certified to process transactions in the gold-backed money, said Zabron Chilakalaka, the chief executive officer of ZimSwitch, the national payments platform.

A milligram of the new digital money sells for $0.06, according to daily prices available on the central bank’s website. The minimum purchase of ZiG by individuals is $10 and $5,000 for corporates.

The Zimbabwean dollar has lost more than 87% of its value this year as it has struggled to gain widespread acceptance from citizens. Still, authorities vow to defend the local currency and have ruled out abandoning it, like they did in 2009.